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2010 ANNUAL REPORT

A supplement to Carolina Country

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Member Focus Creative

Teamwork Empowerment Fiscal Responsibility

Diversity

Continuous Improvement

Union Power

Citizenship

Stewardship

Integrity & Trust

Executive Message Ever since President Franklin D. Roosevelt signed the federal Rural Electrification Act into law in 1936, rural Americans have enjoyed the wonders of electricity. Today, electricity is a necessity. However, the electric grid that serves most of the nation is aging. It’s reliable, but not “smart” enough for the 21st century. Advances in both technology and renewable energy resources demand a grid upgrade. At Union Power, we embrace change when it benefits you, our members. Two areas of focused improvement during the past year deal directly with making our system as modern as possible – updating our Geographic Information System (GIS) and beginning a system-wide implementation of Advanced Metering Infrastructure (AMI). Both projects add value to you by helping us serve you more efficiently by decreasing operational costs. A renewed focus on safety and the goal of an injuryfree workforce benefits both Union Power members and employees. During the past year, employees have developed and implemented a consistent safety process that emphasizes safe practices not only in the workplace but also in employees’ homes and all places they may visit. Keeping safety in mind helps us to provide you with safe and reliable service. It also adds value to you by helping us keep controllable costs down. Our mission of providing you with safe and reliable power with exceptional value is always a top priority at Union Power. Keeping rates in check is an important part of that mission. Congress is currently debating energy legislation that could impact the price of electric power.

Along with other electric cooperatives nationwide, we want to work with Congress to address climate change issues, encouraging Congress to draft an energy solution that accomplishes environmental goals while keeping energy costs affordable for the end consumer. We urge you to stay informed and make your voices heard. In unity with 42 million other electric co-op consumers across the country, continue to urge your U.S. representative and senators to work with electric cooperatives to keep electric bills affordable. Get involved in this effort by participating in the Our Energy, Our Future™ grassroots campaign at www.ourenergy.coop. Staying member-focused, continuously improving our services, and being fiscally responsible ensures that we are providing you with the best possible value. We pride ourselves in our commitment to you. As always, it is our privilege to serve you.

B. L. Starnes

Tony E. Herrin

President, Board of Directors

Executive Vice President, General Manager

Union Power Cooperative

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Board Members

Highlights of 2009 Annual Business Meeting

Standing from left to right:

Neil W. Hasty, District IV Dent H. Turner, Jr., Asst. Secretary-Treasurer, District I Jim T. Hartsell, District VI Rufus N. Reid, District VI B. L. Starnes, President, District III Vann W. Hilton, District II William R. Wilson, Vice President, District I Richard L. Simpson, District II

• Secretary/Treasurer Jan Haigler read proof of mailing stating each member was notified by mail on September 24, 2009 of the date and time of the 2009 Annual Meeting. • Cooperative Attorney Bobby Griffin announced that 890 members were present or represented by proxy.

Seated from left to right:

Carole P. Jones, District IV Juanita Poplin, District I Jan Haigler, Secretary-Treasurer, District V

Service Territories Union County is our largest service area. It covers 3,501 miles of energized line and 43,534 meters. Stanly County is our second largest service area. It covers 994 miles of energized line and 8,491 meters. Cabarrus County is our third largest service area. It covers nearly 600 miles of energized line and 6,667 meters.

Rowan Cabarrus

Mecklenburg

• Report given by Executive Vice President and General Manager Tony Herrin. • Winners announced for $2,500 in door prizes. • Meeting adjourned by Board President B. L. Starnes.

Mecklenburg County covers 345 miles of energized line and 5,803 meters. Rowan County covers 154 miles of energized line and 1,064 meters.

Stanly

• With Mr. Bobby Griffin presiding, Directors B. L. Starnes, Neil W. Hasty, Jim T. Hartsell, and Juanita Poplin were elected for threeyear terms.

Union

2010 Annual Report

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At Union Power, our mission is to provide you with safe and reliable power with exceptional value. We continually strive to add value to the services we provide you. Three areas of focused improvement during the past year include a renewed emphasis on safety, updating our Geographic Information System (GIS), and beginning a system-wide implementation of Advanced Metering Infrastructure (AMI). A Culture of Safety In the electricity distribution business, safety always has to be a top priority. The U.S. Department of Labor ranks electric line work as one of the top ten most dangerous jobs, on the same list as fishermen, loggers, and military servicemen. At Union Power, we focus on the safety of our members and our employees. But safety is not something that just happens. As part of an initiative in our ongoing strategic plan, we formed a Safety Steering Team in 2009. This team leads employees to maintain an injuryfree workforce that emphasizes safety not only in the workplace but off the clock as well. Our Safety Improvement Process does not tolerate unsafe acts and conditions. Employees identify safety hazards and work together to correct them. More than just

a fundamental process, safety has become ingrained in our employees as they go about their work, and it carries over to their personal lives. Safe practices contribute to Union Power’s fiscal responsibility by helping keep controllable costs down. When we work safely, you reap the benefits. Safety measures taken over the past year have reached beyond our doors into your homes and communities. For Union Power employees, it’s not just about keeping the power on but about improving the lives of our members and those around us.

GIS — Mapping our Way to Better Service Accurate data is a crucial component in serving you efficiently. Geographic Information System (GIS) is a computer-based map that contains detailed layers of

Union Power Cooperative

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information. This data provides the most up-to-date information for performing maintenance on our system and enables our crews to restore power more quickly after an outage. In February of 2009, Union Power began a mapping project to record the precise location of every Union Power pole, transformer, electric meter, and the equipment associated with them. Technicians used signals from satellites to compute mapping coordinates, and then used global positioning equipment (GPS) to record these locations. This included nearly 5,900 miles of overhead and underground lines serving over 65,000 members in our five-county service area. Mapping was completed in late August, and the project will conclude in October. GIS adds value to your electric service by helping us maintain our infrastructure efficiently, improve outage response times, and ensure the safety of our crews. GIS technology also provides location-based information to other systems within our organization, laying the foundation for implementing advanced technology that a smarter electrical grid requires.

AMI — A “Smart” Move Ahead Advanced Metering Infrastructure (AMI) is a system that allows 2-way communication between new advanced meters and our central operations center. The advanced meters we are installing system-wide can be read

remotely over our power lines. This will help Union Power improve efficiencies in operations and accounting. AMI deployment began in June with a pilot project in the Mount Pleasant area of Cabarrus County. Full implementation across our service area is scheduled to be completed within four years. The wealth of data the AMI system provides will significantly improve the services we provide to you. Because the new advanced meters can be read remotely, Union Power can detect, verify, and restore power outages sooner. Better system management and faster outage restoration means less time and money spent on outages. AMI will also open the door to more flexible billing options. Remote access to meter data will ultimately help you make your own energy consumption choices and manage your overall energy use. The implementation of AMI benefits all members. In fact, estimated savings are projected to be substantial. Reductions in power theft, meter reading expenses, and engineering and operational expenses will improve cash flow considerably. This demonstrates Union Power’s commitment to being fiscally responsible while looking ahead. Nurturing a culture of safety, updating our system mapping with GIS, and implementing AMI are all helping us to serve you more efficiently. Our goal is to stay member-focused as we provide you with safe and reliable power with exceptional value.

2010 Annual Report

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Financial Report (as of December 31, 2009)

What We Own

What We Owe

Assets: Originial Cost of Our System We Estimate it Has Depreciated Net Value of Our Property Cash and Investment Reserves: Cash on Hand and in Bank Members Owe Us for Electric Bills Materials and Supplies on Hand Other Investments for Reserves Other Property and Prepaid Expenses Total Assets

$ 258,082,190 54,044,109 $ 204,038,081 9,850,277 9,176,196 1,606,954 289,287 9,451 $ 224,970,246

Liabilities: Long Term Debt Notes Payable We Owe for Power, Material, & Supplies We Hold Consumer Deposits and Payments Total We Owe Membership Fees and Other Capital Patronage Capital Credits and Margins Net Worth (Total Ownership in Co-Op) Total Liabilities and Net Worth

$ 111,484,920 8,250,000 8,737,194 14,889,809 $ 143,361,923 0 81,608,323 $ 81,608,323 $ 224,970,246

Where the Money Came From

Revenues: Sale of Electric Energy Non-Operating Income Total Revenue

124,894,900 2,102,335 $ 126,997,235

How the Money was Used

Expenses: Wholesale Power Cost Operating Expenses Depreciation Expenses Taxes Interest Total Expense

75,774,339 22,856,093 7,911,921 4,005,346 6,313,454 $ 116,861,153

Net Margins

Statistical Highlights

Average Meters Billed Miles of Distribution Line Member per Mile of Line Total Assets Net Investment in Plant Total kWh Purchased Number of Employees

$ 10,136,082

1989 25,959 3,302.81 7.86 $ 46,431,099 $ 35,849,591 437,238,080 80

1999 40,861 4,376.83 9.34 $ 98,909,249 $ 86,231,548 710,971,693 99

2009 65,040 5,935.62 10.96 $ 224,970,246 $ 204,038,081 1,231,180,060 119

Union Power Cooperative

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How Your Dollar is Spent Cost of Power 61¢

Net Margins 8¢

Cost to Operate 17¢

Net Plant Investment per Member

Cost of Borrowing Money 5¢

Depreciation Costs 6¢

Taxes 3¢

kW Peak Demand 104,963

$1,381 $2,110

180,912 $3,137

Monthly kWh Use per Residential Member 1,157

342,594

Miles of Underground Line 342 1,186

1,193

2,580

1,284

Right-of-Way Maintenance

% of Distribution System that is Underground

— Union spent a large amount on right-of-way * Hugo clearing that was reimbursed by FEMA.

10.3%

$1,399,189

27.1% $3,062,524

43.5%

Wholesale Power Costs (in thousands) $20,289 $32,747 $75, 774

1989

1999

2009

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P.O. Box 5014 Monroe, NC 28111-5014 704-289-3145 1-800-922-6840 www.union-power.com

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2010-10_Union_AR  

2010 ANNUAL REPORT A supplement to Carolina Country Executive Message Stewardship Integrity & Trust C it iz e n s h ip D iv e r s it y T...

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